Casual employee reform – A big win for employers and a smaller win for casual employees
On 22 March 2021, the Federal Parliament passed a significantly reduced version of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021, commonly referred to as the Omnibus Bill (Bill). The Bill (now an Act) amends the Fair Work Act 2009 (Cth) (FW Act), and most of the provisions came into effect on 27 March 2021.
Although a number of sections of the Bill, including those that criminalised wage theft, were dropped before being considered by the Senate, the passing of the Bill addresses uncertainties and issues around casual employment.
The main purpose of the amendments was to address the uncertainty, financial implications and potential litigation resulting from the Rossato1 and Skene 2 decisions. In these cases, long-term casual employees were found to be permanent following consideration of the entire employment relationship, rather than just the employment contract. These findings meant the employee was owed various paid leave and other entitlements reserved for permanent employees, and importantly, the employer was not permitted to offset the casual loading payments against the entitlements owed.
In order to address issues associated with casual employment, the following amendments have been made to the FW Act:
We have summarised these amendments below.
Previously, there has not been a statutory definition of casual employee. This has led to litigation, such as the Rossato and Skene cases. The FW Act now has a definition for casual employee which should significantly reduce the volume and risk of claims.
According to definition, a person will be considered a casual employee if they are offered employment with "no firm advanced commitment to continuing and indefinite work according to an agreed pattern of work" and they became an employee as a result of accepting that offer.
Importantly, the only factors that will be considered in determining whether the employer has made "no firm advance commitment" are whether the:
The assessment is to be made on the basis of the offer, not the subsequent conduct of either party.
Where workers have been engaged as casual employees, they will continue to be casual employees until they elect to convert to, or are otherwise offered, part-time or full-time employment.
This definition applies retrospectively to offers of casual employment that were given before, on, or after commencement of the amendments, other than where a court has made a binding decision in relation to a particular employee. This will significantly limit any claims that casual employees might have previously been able to make to an underpayment based on alleged permanency.
Another protection for employers against underpayment claims by casuals alleging permanency, is that employers will be allowed to use casual loading (usually at least 25%) to offset Relevant Entitlements, if it is found that an employee has been incorrectly described as a casual employee. Relevant Entitlements include:
This offsetting can only occur where an employee has been paid an identifiable amount (the loading amount) to compensate them for not having one or more entitlements during their employment. The loading amount can be identified either in a contract of employment or a fair work instrument (e.g., a modern award or an enterprise agreement), and can (but does not have to) include the proportion of the loading amount attributable to each entitlement.
Again, this definition applies retrospectively to offers of casual employment that were given before, on, or after commencement of the amendments, other than where a court has made a binding decision in relation to a particular employee.
The win for employees is that while there have previously been casual conversion rights (on request) for employees covered by some modern awards, the FW Act now provides these rights to all National System Employees. It also requires employers to actively make offers of permanency in certain circumstances.
Employers (other than small businesses) must now offer casual employees conversion to a permanent part-time or full-time role if:
The conversion offer must be made in writing to the employee within 21 days of the 12 month anniversary and it must be consistent with the regular pattern of hours worked in the previous six months of employment. Employees have 21 days to accept or reject the offer, with failure to respond considered a rejection of the offer. After acceptance and within 21 days, the employer must both hold discussions with the employee about the details of the offer, and give the employee a written notice confirming the hours of work and the date of effect.
Importantly, an employer is not required to make a casual conversion offer if there are Reasonable Grounds" not to make the offer. Reasonable Grounds include, in the following 12 months:
If an employer has Reasonable Grounds to not make an offer, they must still notify the employee in writing within 21 days of the reasons why they are not offering conversion. If a dispute arises about casual conversion, this can be resolved using dispute resolution procedures in an applicable industrial instrument, the employment contract (if any), or the FW Act. Disputes may also be addressed using the existing small claims procedure.
As a transitional provision, employers (other than small businesses) have six months from 27 March 2021 to assess the casual employees who meet the Eligibility Requirements and provide either conversion offers, or a notice of Reasonable Grounds not to make the conversion offer.
Under some modern awards, casuals have been able to request conversion to permanency for some time. However, the amendments mean that all casual employees have the right to request conversion to permanency from their employers (including small businesses) if they satisfy the Eligibility Requirements discussed above, and in the past six months:
Employers must provide a written response to an employee’s request for conversion within 21 days. In determining whether to accept or reject an employee’s request, an employer is again required to take into account the Reasonable Grounds mentioned above. Importantly, an employer must not refuse a request unless they have consulted with the employee.
These conversion provisions are contained within the National Employment Standards in the FW Act, and carry the possibility of civil penalties if an employer is found to be in breach. Further, employers are not permitted to vary or terminate an employee’s hours, to avoid any obligation to casual conversion.
These conversion rights will be considered workplace rights for the purposes of general protections provisions. This means an employer may be sued for compensation and civil penalties if adverse action (e.g., dismissal, offering less shifts) is taken against an employee because they have these rights, or have exercised, or proposed to exercise, these rights.
Currently civil penalties are up to $66,000 for a corporation and up to $13,320 for an individual involved, for each breach.
The last significant change is employers will be required to provide casual employees with a Casual Employment Information Statement either before or as soon as practicable after they commence employment. The Fair Work Ombudsman has already developed this statement, and it includes information such as the meaning of casual employment and the right to casual conversion.
These are important changes impacting casual employment for employers and employees. Employers with a casual workforce will need take the following steps:
At the time of writing, there have been media reports about a potential constitutional challenge in relation to whether the Commonwealth has acquired property (i.e., the right of certain casual employees to underpayments based upon permanency) other than on just terms. We will continue to monitor this situation and provide updates as necessary.
If you require any further information or clarification, or for assistance with casual contract templates please contact our Workplace and Employment team.
1 WorkPac Pty Ltd v Rossato  FCAFC 84.
2 WorkPac Pty Ltd v Skene  FCAFC 131.